Wednesday, October 10, 2007

Engineering Business

I had a revelation a few days back about business. I believe one of the main reasons a business will fail is because the person running the business treats it more like a hobby than a business. What I mean by this, is that in order to succeed there has to be metrics to track where you've been, where you are and where you are going. If you only focus on doing what you've always done, or just whatever task is at hand and leave out this perspective you lose your propensity towards growth and it becomes more of a job than a business.

I read somewhere recently about this kid in a third world country. He spends his day begging on the side of a popular road. What's special about him is that he varies what he says, how he says it, his body position and various other factors for each situation. He then keeps statistics of the results in order to determine what combinations work best for what types of tourists or other people that pass by. Now that is using an engineering approach to business.

My current favorite TV show is House. The reason I love it is because, unlike how I envision most doctors, he takes an engineering approach to diagnostics. He creates a list of symptoms, determines treatment and proceeds. If the output does not match what he expects, he now has another symptom to use to analyze the problem and determine a new diagnosis. The beauty of this is that he is able to remove all the clutter of potential traps towards figuring out what is wrong with the patient, including emotional attachment.

Now, keeping this in mind, I've been analyzing my own business.

Since starting going to get leads, the weekly numbers have been as follows:

8/24 - 15 leads
8/31 - 21 leads
9/14 - 19 leads
9/21 - 10 leads
9/28 - 6 leads
10/5 - 8 leads
* 9/14's results are slightly skewed since they include 9/7's results as well.

So I'm averaging a little over 11 leads per week. Since usually you will get positive results from 1 out of every 100 leads, this means that every 10 weeks I should get 1 commission. So, maybe between $500-$3000 ever 2.5 months, or an average of $200-1200 a month, with a start delay of 3 months.

Based on this, I think my conclusion to start going to other counties in order to pull in a larger amount of leads is a good idea. Also, I need to start determining other potential sources for leads, such as houses with tax liens or code violations as well as just the foreclosures. Once I've developed a healthier flow of leads, hopefully in the range of at least 25 per week, then I can do some analysis of my investor to see how good or bad he is versus the average 1 connection for every 100 leads.

Clearly though, these statistics point out how great a need I have to increase the number of leads I find and move my pursuits forward to the next step.

The other important thing in business that ties in well with statistics, is goal setting. My current goal is to expand my operation this week by visiting courthouses in other counties. This will give me some familiarity with their locations, best routes to get there, amount of time it will take to visit them, as well as how much potential they have for leads. Then with this information, I can start finding ways to incorporate visits in my weekly routine. The goal being to hopefully double or triple my flow of leads. I'd like to get my average up from 11 to at least 25 by the end of the month by incorporating these new methods.

Now with some stats and goals, I'm hoping to move this business to the next level and actually start seeing some strong results. Then I'll be able to keep pushing for more growth by doing more statistical analysis and setting new goals.

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